Revisiting the Taxation of Fringe Benefits

55 Pages Posted: 25 Oct 2015 Last revised: 26 Jul 2016

See all articles by Jay A. Soled

Jay A. Soled

Rutgers University

Kathleen DeLaney Thomas

University of North Carolina School of Law

Date Written: October 23, 2015


The receipt of workplace fringe benefits has become increasingly ubiquitous. As a result of their employment, employees often receive a cornucopia of fringe benefits, including frequent-flier miles, hotel rewards points, rental car preferred status, office supply dollar coupons, cellular telephone use, home internet service, and, in some instances, even free lunches, massages, and dance lessons. Technological advances and workforce globalization are important contributory factors to the popularity of what were, until the turn of this century, previously unknown fringe benefits.

In years past, taxpayers could readily turn to the Internal Revenue Code to ascertain the income tax effects and reporting responsibilities associated with fringe benefit receipt. However, today’s fringe benefits have evolved far beyond what Congress contemplated when it enacted fringe benefit reform over thirty years ago. As a result, the existing statutory tax compliance framework does not adequately address the recent transformation of the workplace, as many modern fringe benefits are not specifically excluded from the income tax base yet are not currently being reported as taxable.

This Article examines what has been an increasingly commonplace phenomenon: employers and employees ignoring their responsibilities to report the receipt of fringe benefits as taxable income. It argues that Congress has an obligation to preserve the tax base and, accordingly, must institute reform measures to ensure taxpayer compliance. Failure to take action will trigger an expansion of such fringe benefit offerings, eroding the tax base and jeopardizing the integrity of the income tax system.

Keywords: Income taxation, fringe benefits, tax policy

JEL Classification: E62, H20, H21, H24, H25, H29, K34, O33

Suggested Citation

Soled, Jay and Thomas, Kathleen DeLaney, Revisiting the Taxation of Fringe Benefits (October 23, 2015). 91 Washington Law Review 761 (2016), UNC Legal Studies Research Paper No. 2679062, Available at SSRN:

Jay Soled

Rutgers University ( email )

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(973) 353-1727 (Phone)

Kathleen DeLaney Thomas (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919-843-7630 (Phone)

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